AYULI JEMIDE

NIGER DELTA DEVELOPMENT COMMISSION & NIGERIAN BAR ASSOCIATION

CONFERENCE ON LAW, PEACE & DEVELOPMENT

IN THE NIGER DELTA

6th May 2008, Presidential Hotel, Port Harcourt

Public Private PartnershipFor Infrastructural Development

In The NIGER DELTA

AYULI JEMIDE

OUTLINE

1. KEY ELEMENTS OF PPP’S

2. CORE PPP PRINCIPLES & THE NIGER DELTA

3. RELEVANT LEGAL AND REGULATORY FRAMEWORK FOR INFRASTRUCTURE AND PPP’S

4. TALKING POINT ON PPP/INFRASTRUCTURE PROJECTS IN THE NIGER DELTA

5. SOME USEFUL CASE STUDIES

6. IMPERATIVES FOR PPP’S IN NIGER DELTA

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Key Elements of Public-Private Partnership

• A contractual partnership between a government (public) entity and a private company (or a non-profit private body) that provides a public service to citizens.

• A good PPP should improve a service provided by Government at a reasonable cost to the end user.

• Typically, the Public Sector is buying a service, and the private sector is investing for Profit.

• Flexible contracting: Lease, Manage, Build Operate & Transfer, Joint Ventures, Service Contracts. Anything goes!

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HOW WILL CORE PPP PRINCIPLES PLAY OUT

WITH NIGER DELTA PROJECTS?

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PPP’S are ONLY for VIABLE projects

RULE RULE

NO. 1NO. 1

• Feasibility: a) Is it possible? b) What will it cost?

• Viability: a) Will cash flow maintain service levels?

b) Will there be a profit or ROI? Can we identify viable project types in the

Niger Delta?

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Allocate RISKS to the party best able to handle them

Usual Parties: Govt, Investor, Financier -

Insurance.

Usual Risks: Political, Financial, Operations, etc, and now Security

Which party can best handle the peculiar risks

in the Niger Delta? How?

RULE RULE

NO. 2NO. 2

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PPP must address STAKEHOLDER concerns

NEEDS ANALYSIS: Do they need it? Is the need more pressing then other neglected areas?

AFFORDABILITY TEST: Can the public afford the User Charges? Will it be robbing Peter to pay Paul?

Which proposed PPP’s in the Niger Delta will ably address these issues?

RULE RULE

NO. 3NO. 3

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RELEVANT LEGAL AND REGULATORY FRAMEWORK FOR INFRASTRUCTURE AND

PPP’S

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WHO CAN CONTRACT IN PPP’S?

1) Those empowered by the Infrastructure Concession Regulatory Commission Act 2005

Section 1 “Any Federal Govt Ministry, Agency, Corporation, or

body involved in the financing, construction, operation or maintenance of infrastructure, by whatever name called, may enter into a contract with or grant concession to any duly prequalified project proponent in the private sector for the financing, construction, operation or maintenance of any infrastructure……in accordance with the provisions of this Act.

Question Question

NO. 1NO. 1

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WHO CAN CONTRACT IN PPP’S?

2) Government Agencies empowered by Law

Examples:- Federal Emergency Road Maintenance Act

Section 8- Niger Delta Development Commission Act –

Section 7 1 (b), 8 (e) ?

Question Question

NO. 1NO. 1

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WHO CAN CONTRACT IN PPP’S?

Question Question

NO. 1NO. 1

STATE GOVERNMENTS:

Section 5 (2) ( a) (b) of 1999 Constitution:

Vests Executive Powers in Governor: “shall to execute and maintain all Laws made by the House of Assembly and with respect to which the House of Assembly has for the time being power to make laws”. – Everything on the concurrent or residual legislative list?

An enabling Law for PPP enacted by each State is advisable for clarity and investor confidence.

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WHO CAN CONTRACT IN PPP’S?

Question Question

NO. 1NO. 1

LOCAL GOVERNMENTS:

4th Schedule to 1999 Constitution lists functions of LG’S to include:

Maintenance of roads, and in conjunction with the State: primary, vocational, and adult education etc

Also Local Govt Laws have similar Executive-power provisions for the LGA Chairman as that of the Governor contained in the Constitution

Are these sufficient for a serious investor?

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WHO CAN LEGISLATIVE?

Exclusive

Federal Roads

Maritime

Aviation

Mines & Minerals

Railways

Nuclear Energy

Concurrent

Electric Power

Industrial, Commercial & Agric Dev.

Education

Residual

Urban planning

Transportation

State Roads

Water

Housing

Health

Question Question

NO. 2NO. 2

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WHO OWNS THE ASSETS?

QuestionQuestion

NO. 3NO. 3

STATE

GOVERNMENT

16%FEDERAL GOVERNMENT

17%

LOCAL GOVERNMENT

67%

ROADS FOR EXAMPLE:

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TALKING POINTS ON INFRASTRUCTURE AND

PPP’S IN NIGER DELTA

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PIONEER’S BURDEN

Are there successful PPP projects in the Niger Delta?

- Educate and Inform - Process to encourage credible investors - Legislation - PPP Unit with qualified project officers - Identify, remove, hindrances and obstacles

PointPoint

NO. 1NO. 1

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BANKABILITY

THIS WOULD BE AN ISSUE:

1. Project Finance: Cash flow Lending2. Infrastructure is not a briefcase project3. Risk Analysis is high: Project risk, Operational

risk, Economic risk, Endangered Asset.

PointPoint

NO. 2NO. 2

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Can we cross the Bankability hurdle?

Some Options:

- More Govt funding to reduce private sector risk- 100% Govt funding with Private Sector as Operators- State or Federal Government Bonds- Sovereign Guarantees & Indemnities- Spread funding into bite size portions- Structure collateral rewards i.e shadow tolls, guaranteed

income plus @ a minimum IRR (rate of return).

PointPoint

NO. 2NO. 2

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RISKS !!!

ALLOCATION OF RISKS WILL BE KEY TO PPP’S IN THE NIGER DELTA

• Can we allocate risk to Communities? • How we allocate risk to a non-stakeholder?

• High risk demands higher premiums and makes the user charges higher.

PointPoint

NO. 3NO. 3

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WHO TAKES RESPONSIBILITY?

WOULD FEDERAL, STATE, AND LOCAL

GOVTS TAKE RESPONSIBILITY FOR CERTAIN FORCE MAJEURE EVENTS?

E.G. BAIL OUT CLAUSES THAT GIVE INVESTOR A GUARANTEE THAT THEY WILL NEVER LOSE THEIR MONEY

PointPoint

NO. 4NO. 4

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SOME USEFUL CASE STUDIES

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LEKKI ROAD CONCESSION

• State Govt passed the Lagos State Highway, Roads & Bridges Law to support this transaction.

• State Government gave adequate Guarantees: Cash Bond, Access to Site, etc

• Signed Non-Compete Clauses• Threw in other projects as sweeteners• Set up a Unit to monitor PPP’s• Stamp Duties Exemption from FGN• NAICOM Exemption for Offshore Reinsurance

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TAJIKISTAN POWER PROJECT

•ABOUT TAJIKISTAN:• Mountain region of Former Soviet Union• Civil war just ended• Per Capita Income was $160 a year • 80% of population lived below poverty line• People used wood for heating: the forests went sparse

and respiratory disorders were common• 43 % of homes had no electricity• Homes with electricity were used to paying < 1/10th of

current production costNOT AN INVESTORS HAVEN FOR A POWER PROJECT

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DEAL STRUCTURE

WORLD BANK IDA

$1OM @

0.75%

Tajikistan

GOVT

On-lending@ 6%As Part Finance

PAMIR ENERGY

AKFED -70%

($8m Equity)

IFC – 30%

($3.5m Equity)

($4.5m Debt)

Tajikistan

GOVT

5.2% Margin

$5mGrant from Swiss Govt

+POOL

OF

FUNDS

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LESSONS

• 25 year Concession on Electric Utility Assets – It’s an interesting PPP!

• Must not be a big project - 30,000 customers initially.

• Employment is a major spin off - 595 employees.

• Conflict ridden areas should seek funds from right places

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MORE LESSONS

• Government used its pool of funds to subsidize a “lifeline” Tariff – An ingenious Social Protection Scheme.

• Donor and Funding Agencies are key factors in high risk PPP projects

• Think outside the box – This pioneered a new mode of collaboration

• Cheaper funding arranged by Govt. gave a fair return on investment

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AFGHANISTAN HEALTH PROJECT

BACKGROUND INFORMATION

In 2002 Afghanistan had one of the worse basic health indicators in the world:

- 25% of children died before their 5th birthday

- 165 of every 1000 children died at birth

- 1600 maternal deaths in every 100,000

- Over 60% of population had no access to any basic health service

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HOW WAS PROJECT STRUCTURED?DONORS LOCAL

GOVTNGO’S STATE

GOVT• MONEY • PROVIDE LAND

• LABOUR FOR BUILDING HEALTH CENTERS

• TRAIN COMMUNITY BASED PERSONNEL

•SET UP HEALTH COMMITTEES

• OPERATE THE HEALTH CENTRES VIA CONTRACT AFTER COMPETITIVE BIDS WITH SET OPERATIONAL CRITERIA AND LEVELS: EQUIPMENT, STAFF, PRICING ETC

• OWNS THE HEALTH CENTRES

• REGULATES THE STANDARDS AT HEALTH CENTRES

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WAS IT SUCCESSFUL?

2002 2005Under 40% had access to basic health

Few Community based health Personnel

Haphazard approach to health care

Limited local participation in health care delivery (Mostly NGO’s)

77% had access 3 years later

27 Health Centers manned by Trained indigenes

Standardized classification of health facilities in all the communities

Ongoing Capacity Building should see more health centers run by locals when Concessions are over.

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IMPERATIVES FOR PPP PROJECTS IN THE NIGER

DELTA

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1. Use Low Hanging Fruit

Pioneer with projects that:

a) Require minimal Govt. involvement

b) Are quick to achieve

c) Generate employment and capacity building

d) Are service oriented

For example: Health care schemes or Education.

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2. Start With Parties Who Have Vested Interest

• It is easier to work with the oil companies who already have a vested interest and sunken costs than to find “green” investors.

• OPCO’S, Govt and NDDC should start a PPP task force immediately to fashion a roadmap

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3. Start With Service-Oriented PPP’s

• PPP’S that affect standard of living should be uppermost.

• Studies from Post Conflict countries say this is the fastest route to host community buy-in. Service oriented PPP’s are seen for their value NOT as contracts to the oppressors.

• E.G – Education, Health, Capacity Building.

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4. Network with International Agencies

• MDA’S (Multilateral donor and credit agencies are key) World Bank IDA, MIGA etc

• TO:• Give risk guarantees• Grants and soft loans• Training and capacity building

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CONCLUSION

• IT IS NOT IT IS NOT ROCKET ROCKET SCIENCE !!SCIENCE !!

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• THANK YOU FOR LISTENING